What is there to know about finance and tax in Sweden? If you are considering a move, then it is useful to get as much information as possible before you move.
Are you thinking about a move to Sweden?
Perhaps it is just a consideration at the moment, and you are just in the early stages of research. You may be much further along the process and actually already be in the process of moving.
In addition to finding work and somewhere to live, one of the most important starting points will be finances. How much will it cost to move and how much will it cost to live in Sweden? How will finance and tax in Sweden affect you? Make sure that you are aware of all of the local charges and taxes that will apply to you.
Life will be much more straightforward if all of these things are in order before you make the move.
From income tax and social security to corporate tax and VAT, we take a look in more detail at what you need to know.
Tax obligations when moving to a new country
Wherever you go, there are going to be the formalities of tax and contributions to deal with. You may be retiring and not have to worry so much about income tax and social security contributions, but you still need to be aware of any local taxes or charges.
For those relocating with work or starting a new job in a new country, income tax will be the priority. How much is the income tax rate? What about social security? You need to know the finer details of finance and tax in Sweden such as income tax rates and social security and how it applies to you.
When you start your new job, your employer should take care of this. It is always wise to make sure though by carrying out your own research.
If you are self-employed, then you will need to register for self-assessment and look into social security contributions.
If you are moving your business or opening a new branch, then it is important to be aware of corporate tax rates and VAT charges. Is the threshold different to that of the country you are currently trading in?
Of course, there is not only the formalities of Sweden to consider. You also need to ensure that you inform the tax department at home that you are leaving. You may need to submit a final tax return or, if employed, you may even be entitled to a refund.
If you are moving part way through a tax period then it is important you make sure everything is up together. You also need to inform the tax department of your new address.
It is critical that you receive any correspondence that might be sent.
Income tax rates in Sweden
one of the highest rates of income tax anywhere in the world
Sweden has one of the highest rates of income tax anywhere in the world with income tax currently charged at circa 57.10% of income. It is a progressive rate with 0% being charged from SEK0 to SEK18,800.
For earnings of SEK18,800 to SEK438,900, the income tax rate is 31% with 7% going to the county and 24% to the municipality.
From SEK 438,901 to SEK 638,500, tax is charged at 31% + 20% and for earnings over SEK638,500, income tax of 31% + 25% is charged.
You need to understand that the taxes are split between the national government, the municipality and the county.
Tax is collected via a PAYE system with the employer also making contributions.
For the self-employed, you need to obtain a permit before you enter the country. As a self-employed person with a resident permit, you cannot take employment with an employer. Other requirements mean that you must be experienced in your field and that goods and service must be produced and sold in Sweden.
If you are considering moving to Sweden as a self-employed person, it is advisable to seek professional advice first.
Social security in Sweden
There are various social insurances that make up the welfare system in Sweden. All of these insurances are handled by the National Agency for Social Insurance.
The benefits of the social security system include child allowance, housing allowance, benefits and support for the ill and the elderly.
The municipality deals with welfare on a local basis. The total amount paid into the social security system amounts to a total of 31.42% of a person’s salary. These contributions are split between the employee and the employer.
For those that are self-employed, the contributions are lower.
Whether you are employed or self-employed, you need to check how the contributions apply to you and your circumstances.
Corporate tax in Sweden
The rate of corporate tax in Sweden is 22%. This has reduced from 28% in the last decade.
If you are considering moving your business to Sweden or expanding into Sweden, you need to make sure that you obtain permission first. Then you must register your business. There is plenty of information available as to the requirements for starting or running a business in Sweden.
If in any doubt you can hire a professional or consult with a trade body for more information and guidance.
You must make sure that you are keeping accurate accounting records and that you are submitting your tax returns.
VAT in Sweden
The rate of VAT in Sweden is 25%.
Like most countries, there are reduced rates of VAT. In the case of Sweden, the reduced rates are 12% and 6%.
There are certain healthcare and financial services that are VAT exempt.
For those businesses that qualify for VAT, returns must be submitted either monthly or quarterly.
The VAT threshold in Sweden is nil so all businesses must register regardless of their turnover. There is however, a distance selling threshold of approx. EUR 34,000 or SEK 320,000.
Other Swedish taxes
Aside from the usual finance and tax in Sweden obligations like income tax, social security and corporate tax, what other taxes are there to consider?
Well, inheritance tax was abolished in 2005 so that just leaves capital gains tax. Capital gains tax is really the only other tax of note if you are considering a move to Sweden.
Beware though that each local county and municipality will have slightly different rules and regulations so it is best to check if there are any other charges or rates that might apply to you.
Once you know where you are moving, you can research the county and municipality in more detail. Carrying out your research before you move will make things much easier for you.